Historically, the British public have taken preference to owning a home over renting. However, this has seen a recent shift.
Today’s reality is one of property prices that have outstripped wage increases by quite some margin. Therefore, renting seems the more attractive option to many.
New lending rules mean that buying a home can be tricky as well as expensive – especially when you add in stamp duty, legal fees and other additional costs. But, owning a house has many perks also.
So, what are the pros and cons of buying a home? We weigh in on the issue.
Rent or buy - the debate
Until recently, renting was seen only as a means for saving money - a temporary solution. Home ownership was seen as the ultimate goal! The mentality was ‘why rent when you can buy?’
But, this isn’t always the case anymore. For many, rent payments leave it impossible for some people to save money. With the prices of monthly rent ever increasing, particularly in London, owning a home can feel like a distant dream - even though there are ways to improve your chances of getting a mortgage.
However, for some, renting is a choice. With sky-high house prices and associated extra costs, it’s easy to see the negatives of purchasing a home.
So, which side are you on?
Pros of owning a home
Now we know the reasons behind why some are conflicted over buying, it’s time to delve into the advantages and disadvantages.
Let’s start with the positives! Here are some of the key advantages of buying a house.
Your house, your rules
One of the best perks of buying a house? You make the rules!
Living in your own freehold property means you get to call the shots. You can choose the décor, who lives there, how many pets you have and what to do with any outside space.
You also have the potential to make significant structural changes, if planning allows. This enables you to completely change the look and feel of a property over time.
With a leasehold property, you retain many of the same advantages of personal choice, although the overriding Head Lease may restrict things like structural alterations and the keeping of pets.
If you own your property, you have the freedom to make choices that a tenant may not.
Buying a house is an investment
When you rent a home you have nothing to show for it at the end of your tenancy. All of those monthly payments have allowed you to live there, but once that money’s gone, it’s gone!
When you buy a property, a proportion of your mortgage payments and the money you spend on renovations or improvements are effectively investing in your asset. It’s an ongoing situation which, if done sensibly, should reward you at a later date.
You’re not tied into a tenancy agreement
In a rental property, the landlord controls when you leave. Most tenancies are for an initial term of 6 to 12 months. The tenancy agreement will also include a notice period (usually 2 months) which the landlord can use to get the property back at the end of a fixed term or during a periodic tenancy.
Once they serve the notice you have to leave, irrespective of whether you want to do so. Buying a home gives you complete control over the decision to move.
Resolve issues fast
Another upside of owning property is control. You handle any issues that arise yourself. Landlords are renowned for dealing with problems at a leisurely pace.
If you have a broken shower or damp issue in a room, you take ownership of finding a resolution. This means you can fix it at your own speed, within your budget, to a quality that satisfies you. There’s no need to rely on anyone else.
Become part of the local community
Buying a house helps you settle down for the long term. This helps you become part of the local community. From local facilities to schools, you and your family can find a place to call home. Owning property in an area gives us a sense of belonging and permanency.
Own the property outright
At the end of your repayment mortgage term you’ll own the property outright. This is a seriously attractive situation. You’ll substantially reduce your monthly outgoings and have a significant asset behind you.
Want to know how long it’ll take you to pay off your mortgage? Give this handy calculator tool a try.
It feels good!
Owning a property comes with responsibilities, but also gives a great sense of satisfaction and pride. It offers a safe environment for you and your loved ones to live in. If managed sensibly, it can become a valuable asset at the same time.
Cons of buying a house
But, inevitably, there are some downsides to owning your own home.
Buying a home is a huge ongoing commitment, so you need to consider the potential downsides of property ownership before taking the leap.
It’s more difficult to move
When you rent, you have a lot more flexibility in the process of moving. Job moves and relocations can be easily achieved when renting, for homeowners it can be a hugely stressful situation. The time it takes to sell and complete the process of buying can be a real burden.
Can you guarantee a consistent income?
Taking on a property and, in most cases, a significant debt to make the initial payment is a big commitment. Even with a good credit score when purchasing the house, things can change.
You need to be secure in your ability to earn a consistent income and happy to shoulder the potential costs of running and maintaining your home.
Interest rates can rise
You’ll be paying interest on money you borrow to buy your home. You need to be aware of the effect an increase in interest rates can have. Even a small uplift can dramatically alter a family’s budget.
There is a way to mitigate against unexpected interest rate rises. Consider a fixed rate mortgage to ensure you don’t see a rise over time.
Buying a house is expensive
Expect to pay out additional and unexpected costs to maintain your house. Some properties are a lot easier to maintain than others – modern flats and new builds will need minimal work/money spent on upkeep. Though some properties can become a real drain on your resources.
Don’t just consider mortgage payment costs when working out affordability. Think about the ongoing cost of ownership, such as homeowners insurance – especially if you’re buying an older property. Even if you manage to negotiate your house price down, upfront payments aren't the only costs you need to worry about.
You can’t assume property value will increase
Stamp duty is now sitting at 5% for the average priced UK home, for first-time buyers only. This means you’ve effectively made a loss from the moment you buy, especially when you consider surveyor, legal fees and removal costs. This isn’t usually an issue because prices are often expected to increase in value.
It’s important to accept that this isn’t always the case. You can’t assume value will increase. If your house ends up being worth less than the amount you outlaid to buy it, you could run the risk of going into negative equity. This means selling your home may not generate enough proceeds to repay the amount you borrowed. This is a very unfortunate position to be in.
Some people prefer to rent
Some people just prefer to rent – they have no definite ties to their home, any issues are resolved by someone else and they don’t have to commit for an extended period of time.
It’s easier to be confident in the cost of living in a rented property. Usually, if you’re renting, you’re not responsible for the cost of maintenance. You also escape the fear of rising interest rates. For those who want to avoid the headaches of ownership, renting is a small price to pay.
Decided on buying?
Clearly, there’s no answer to the question ‘is it better to own or rent a house?’
But, for many, buying comes out on top. This means you’ll need to get to grips with mortgage lenders and mortgage interest.
Save yourself time, money and hassle and talk to a professional mortgage adviser to make sure you find the best solution for you. Find the best mortgage quotes here.